Existing Home Sales Edge Lower In February - March 20, 2014

Sales of existing homes ticked a bit lower in February, edging down by less than half a percentage point from the month before, in a basically on-target economic release.

On point, such sales totaled 4.60 million homes on an annualized basis last month. That compared with the prior month's 4.62 million units and was a tad lower than the 4.62 million rate forecasted earlier.

It should be noted that this total, albeit little changed from January, was still the lowest such home sales number since July of 2012. It is not so much that the nation's housing fundamentals are weakening, as it is that the long and arduous winter has served to delay some transactions.

That said, such activity has been easing for some months now, so it may be that the weather is just part of the equation, with the earlier increase in mortgage rates, the lack of plentiful available supply, and the higher pricing levels also playing roles. This latter item, though, is a mixed blessing. True, the higher price levels reduce affordability, but buyers would, we sense, rather purchase a home when it looks as though prices are on the way up than heading lower.

All told, the median sales price of a used home was $189,000 in February, up 9.1% from a year earlier, a healthy advance. Also, inventories were at 2.00 million homes last month. And while this was up 5.3% from a year before, it still represented only a bare 5.2-month supply at the current sales pace. A six-month level of unsold homes is considered normal. Thus, supplies are still somewhat constrained.

Meanwhile, given the modest pickup in inventories, it is now expected that buyers will soon enter the fray, especially if the weather becomes progressively less of a factor, as seasonality would suggest. The increase in inventories also implies prices will not continue to rocket ahead. Our sense is that they will trend higher, but on a more gentle slope.

Taken as a whole, this report was basically a non-event, and does not alter the aggregate picture in which we expect the economy to move slowly, but relentlessly, ahead in the months to come, with housing continuing to be a focal point of that resilient expansion, in our opinion. - Harvey S. Katz, CFA

At the time of this article's writing, the author did not have any positions in any of the companies mentioned.